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9 November 2015

Why George Osborne has announced 30 per cent cuts for four departments

The Chancellor's move increases pressure on those ministers yet to reach spending settlements. 

By George Eaton

Which cuts will George Osborne impose to meet his promise of a budget surplus by 2019-20? The full answer will be given in the Spending Review on 25 November but Osborne has revealed the first details today. The Department for Transport, the Department for Local Government and Communities, the Department for Environment, Food and Rural Affairs and the Treasury have all agreed to cut their day-to-day spending (excluding investment) by an average of 30 per cent over the next four years. 

Osborne’s announcement is a reassertion of his authority after the tax credits defeat and an attempt to intensify the pressure on those cabinet ministers yet to reach settlements. Having agreed to further cuts, Transport Secretary Patrick McLoughlin, Environment Secretary Liz Truss and Communities Secretary Greg Clark will join the government’s Public Expenditure Committee, known as “the star chamber” after the 15th century court. Those ministers who prove obstructive will be interrogated by their more frugal colleagues.

Among those yet to reach agreement with the Treasury are Theresa May, Iain Duncan Smith (who has reportedly threatened to resign if Universal Credit is cut) and Philip Hammond. The reductions announced today, amounting to around £6.4bn still leave Osborne with £13.6bn to find to meet his target of £20bn cuts. With health, schools, international development and, now, defence all protected, the Chancellor’s options are increasingly limited. 

In his speech at Imperial College this morning, Osborne said of his surplus pledge: “With our plan, by 2019-2020, for the first time in a generation, Britain will be saving instead of borrowing; paying down our national debt share, rather than adding to it. I know some ask: why do we need this surplus? I’ll tell you why: to protect working people. A surplus will make our country more resilient, safe and secure.

 “It means that next time we have the money to help us through the tough times when the storms come. Let me put it another way: if our country doesn’t bring the deficit down, the deficit could bring our country down again. That’s why, for the economic security of every family in Britain, we must hold our nerve. And quite frankly, if we’re not into surplus after 10 full years of economic growth, when will we ever be?”

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At such moments, it is worth remembering that we have been before. In the 2010 Spending Review, Osborne vowed to eliminate the structural deficit by 2015-16, a target now not due to be met until 2017-18. Should growth again fall short, or should the cuts prove undeliverable (as in the case of tax credits), many Tories believe that rather than raising taxes, the Chancellor will again emulate St Augustine: “Oh, Lord, grant me a surplus – but not yet”. 

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